Justice Department Challenges American Airlines/US Airways Merger

Tuesday, August 13th 2013, 11:19 am
By: News On 6

The Justice Department and a number of U.S. state attorneys general are challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines' parent company, AMR Corp.

The Justice Department says the merger would result in the creation of the world's largest airline. The government says a combination of the two companies would reduce competition for commercial air travel in local markets and would result in passengers paying higher airfares and receive less service.

8/13/2013 Related Story: American, US Airways Vow To Fight For Proposed Merger

The Department says its Antitrust Division filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.

American Airlines: Turbulent Times

Joining in the suit are attorneys general from Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; Florida; the District of Columbia; Pennsylvania; Tennessee; and Virginia.

6/28/2013: Related Story: Justice Department Probing American Airlines, US Airways Merger

In a news release, the Department of Justice says the merger would also result in higher ancillary fees, such as fees charged for checked bags and flight changes.

The Department says these fees have become profit centers for the airlines and that by reducing the number of airlines, the merger would probably make it easier for the remaining carriers to coordinate fee increases, resulting in higher fees for consumers.

The release says the Department's complaint points out that executives of both airlines have repeatedly said they do not need the merger to succeed.

The complaint quotes US Airways' CEO in December 2011 as saying "A[American] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs."

It also quotes US Airways' executive vice president from July 2012, saying "There is NO question about AMR's ability to survive on a standalone basis."

Just last week, the merger received a green light from the European Union's Commission.

8/5/2013: Related Story: European Union's Commission Approves American Airlines-US Airways Merger

A spokesman for US Airways had no immediate comment. American Airlines did not immediately return a call seeking comment.

American's Maintenance and Engineering base at Tulsa International Airport is the largest private employer in the region. About 6,200 people work at the base.

The Tulsa Regional Chamber of Commerce issued the following statement on the challenge:

The Tulsa Regional Chamber remains supportive of the American Airlines and US Airways merger. We are confident US Airway's decision to merge with American Airlines, a longstanding corporate partner in Tulsa, will keep thousands of high-paying aerospace and manufacturing jobs here in our community.